I know what you're thinking based on the title alone. Is this guy crazy? How can recessions be seen as anything other than negative? And you're right, recessions for some are not a good thing, but they can also be a good thing depending on your perspective.
Recessions are periods of economic decline that can majorly impact businesses, individuals, and economies worldwide. Whether recessions are good or bad depends on which perspective you take.
From an economic perspective, recessions are a necessary part of the business cycle. Recessions can spark innovation as companies look for new ways to stay competitive. During a recession, businesses scale back their production and lay off workers, which reduces costs. This allows businesses to become leaner and more efficient, benefiting them in the long run.
Interest rate increases are a brute force instrument to pump the brakes on the economy. When inflation is hot, the economy can only take so many interest rate rises before it reaches a tipping point where it goes into recession. Many advanced countries are reaching that tipping point right now. Coincidentally, inflation is also allegedly peaking in the US and other countries so we will see.
Historically, many great businesses were born out of recessions and economic disasters. While losing your job isn't a good thing by any means, it's a necessary part of the economic reset that a recession brings. Did you know Airbnb was born out of the Global Financial Crisis? For some, starting a business during a period of great economic stability where investment would be harder to obtain seems crazy, but they pulled it off.
On the other hand, recessions can significantly negatively impact individuals and the economy. People lose their jobs, and unemployment rises. Consumers have less money to spend, which can lead to a decline in economic activity. This can ripple effect, leading to further job losses and reduced economic growth.
While I would never wish for a recession because I know some of my friends and family would be impacted, and I could be too, sometimes an economy needs to enter a recession to cool things down and provide a stronger backbone for future economic growth.
In conclusion, depending on your perspective, recessions can be both good and bad. From an economic perspective, recessions are a necessary part of the business cycle and can lead to increased efficiency and innovation. However, recessions also negatively impact individuals and the economy, leading to job losses and reduced economic growth.
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I fully agree that the recession should not be seen as a bad thing, at least not at all. Surely for the population they represent a negative thing and probably an increase in poverty. But for entrepreneurs and investors, I believe instead they can be excellent moments, both of departure and as a consolidation. Obviously companies that are not strong will not last for certain periods but others will consolidate. Great reflection, thanks for sharing!
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